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Wednesday, May 18, 2005

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IOC to match Reliance's discount to Railways

Our Bureau

Mumbai , May 17

INDIAN Oil Corporation will match the discount offered by Reliance Industries to the country's largest bulk customer for fuel — the Indian Railways.

RIL had offered the Railways a discount of Rs 1,045 a kilolitre on diesel sales. Compared to this, public sector oil companies had offered the Railways a discount of Rs 300 a kl last year.

Since the Railways, like all government departments, is bound by the purchase preference scheme, it had asked public sector oil companies to match the lowest bid. The Railways is expected to save Rs 200 crore this year, given its annual diesel consumption of two million tonnes.

"We are in the process of evaluating the proposal. We will match RIL's price," said Dr N.G. Kannan, IOC's Director (Marketing). Of the total volumes bought by the Railways, Indian Oil supplies roughly 1.6 mt. The competition between public sector oil companies and Reliance to attract bulk customers has intensified over the last year after RIL offered huge discounts to lure customers.

It offered discounts to State transport utilities (STUs) and even tried to lure the Defence sector. IOC, in turn, entered into three/five-year contracts with STUs and the Air Force.

IOC sells 97 per cent of all of the 1 mt fuel purchased by the Defence forces and 84 per cent of the 2 mt fuel bought by the STUs.

The company hopes to sell more than 50 mt through its retail network in 2005-06. It has converted 49 per cent of its network into company-owned-company-operated petrol pumps. It hopes to garner 70-80 per cent of its total 18 mt retail sales through its chosen 2,800 branded retail outlets. While the rest would be sold through the rest of its 8,000-odd outlets, Dr Kannan said.

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